Ridesharing and Car Insurance: A Little White Lie?

When Harry Campbell first decided to supplement his 9 – 5 (as an aerospace engineer) by driving for Uber and Lyft, it was the subversive nature of the startups that drew him in as much as the promise of a little extra cash. “When I first started driving, what drew me towards ridesharing was the disruptive nature, and that’s cool—the disruptive nature is what forces change.” But as time passed, Campbell became concerned about one seemingly small part of the ridesharing picture: insurance. “What started concerning me is when I looked more into the risk,” Campbell says. “Drivers [as opposed to Uber and Lyft] are bearing most of the risk in this situation. We’re providing our own car, and we’re the ones who are going to be dropped by our insurance companies.”

You heard that right: If you work as a rideshare driver and your personal insurance company finds out, there’s a very real chance they might drop you entirely if you have to file a claim—even if you’re filing that claim through Uber or Lyft’s insurance policies. Read on for the low-down on ridesharing and car insurance.

Confessions of a Lying Ridesharing Driver

Quoted interviewed a driver who works for both Uber and Lyft but asked to remain anonymous, because her personal insurer has no idea she uses her car to make money on the side. She explained, “I haven’t told my insurance carrier that I drive for Uber and Lyft for multiple reasons. The first being that I am afraid they would refuse to cover me at all. The second being, if they did say they are able to insure me I am afraid my rates will increase to something I cannot afford.”

This driver’s second fear is not entirely unfounded: Commercial insurance policies are anywhere between three and ten times more expensive than personal auto policies. Campbell explains: “Commercial insurance is not a viable option. Most UberX drivers are part-timers like me; they might be driving five, maybe ten hours a week. If you have commercial insurance costing you $800 or $1,000 a month, you’d have to drive a ton just to break even on that insurance.”

Campbell also has concerns of his own: “I live in the state of California and if I were to call my insurer today, I know for a fact that they would drop me,” Campbell explains on his site. “In fact, I have not found one personal auto insurance company in the state that will cover rideshare drivers. So that means that there are hundreds of thousands of other drivers like me and they are all being asked to lie to their insurance company.”

What the Ridesharing Policies Do Cover?

“The coverage isn’t really an issue,” Campbell explains. “Uber and Lyft do provide primary coverage, it almost is a hybrid policy right now, it’s just this whole thing about getting dropped by your personal insurance. What Uber and Lyft need to do is sit down and work things out with regulators and insurance companies to ensure that drivers get that protection that they’re not going to get dropped by their personal policy.”

Here’s where the most critical part of the problem occurs: When an Uber or Lyft driver is logged in, waiting to accept a rider and be matched with a fare, but is not actually on a trip. In this time, Uber and Lyft’s coverage ceases to apply. But the kink is that most personal auto insurance companies will not actually provide coverage, because their personal policies by and large don’t cover ridesharing activities of any kind. This is true of large companies like Allstate, State Farm, Progressive, and Geico, according to Buzzfeed. This leads to denied claims, and even cancelled policies.

As Buzzfeed News reporters Ken Bensinger and Johana Bhuiyan explain in their investigative piece on this issue, “Simply put, advising drivers to purchase commercial insurance could lead many of them to decide against working for Uber in the first place.”

The Future of Ridesharing and Car Insurance

It is likely only a matter of time before insurance companies and rideshare companies find some kind of middle ground—but whether that looks like hybrid policies for rideshare drivers or something other solution remains unclear, however. But if 2014 showed us anything, it was that a lot can happen in a year with a business taking off as quickly as Uber or Lyft. “I do think the thing about ridesharing in general is that everything is in such a state of flux right now,” Campbell says. “The situation today is by no means what the situation will be in two or even three months. I think within the next year, something will have definitely been worked out—but I think it should be a lot sooner than that.”

UPDATE: Turns out, Uber and Lyft do provide contingent coverage. Campbell explains: “Uber/Lyft do provide contingent coverage but not primary during the gap period (app on, but no passengers)—but the limits are much lower ($50,000/individual/incident for bodily injury, $100,000 total/incident for bodily injury and $25,000/incident for property damage.)”

I'm a Texas-based Kansan who misses seasons but loves breakfast tacos. My journalism and short stories have been published all over, including at Popular Mechanics, USA Today magazines, SELF magazine and Black Warrior Review. I have an MFA in fiction, but I'll stick to the truth at Quoted.